By Max Fisher, Vice President of Economics and Government Relations
A World Trade Organization (WTO) panel on Sept. 15 released a report detailing its findings in favor of China in its case against $200 billion in tariffs first levied by the United States on Chinese imports in 2018.
This is the first time the WTO has ruled against tariffs imposed by the Trump administration. However, the ruling won’t have any immediate practical consequences because the United States is expected to appeal the decision and the WTO’s appellate body is unable the function anyway – as the United States has blocked new appointments to the trade court.
In response to the WTO panel’s findings, U.S. Trade Representative Robert Lighthizer said “the United States must be allowed to defend itself against unfair trade practices, and the Trump administration will not let China use the WTO to take advantage of American workers, businesses, farmers and ranchers. This panel report confirms what the Trump administration has been saying for four years: The WTO is completely inadequate to stop China’s harmful technology practices.” He added that the report has no effect on the Phase One agreement reached earlier this year between the two nations.
The United States imposed tariffs on China in 2018 after releasing “Findings of the Investigation into China’s Acts, Policies, and Practices related to Technology Transfer, Intellectual Property, and Innovation under Section 301 of the Trade Act of 1974.” The U.S. tariffs against China were authorized under Section 301 of the Trade Act of 1974, which authorizes the president to levy tariffs and other import restrictions whenever a foreign country imposes unfair trade practices that adversely affect U.S. commerce.
In the WTO case, China claimed the tariffs violated the WTO’s most-favored treatment provision because the measures failed to provide the same treatment to all WTO members. China also alleged the duties broke a key dispute-settlement rule that requires countries first to seek recourse from the WTO before imposing retaliatory measures against another country.
In a statement, China’s Ministry of Commerce said the nation “approves of the objective and fair ruling of the expert group” and described the WTO as the “core of the multilateral trading system which forms the cornerstone of multilateral trade.”
The WTO ruling is not expected to affect the current trading status between the United States and China. The U.S.- China Phase One Agreement remains in effect and is serving as the current driver of trade expectations between the two countries with the first and second largest economies and militaries (by spending) in the world.